Question 1

A bank may establish a multinational operation for the reason of transaction costs.The underlying rationale being that

Accepted Answer

A) banks follow their multinational customers abroad to prevent the erosion of their clientele to foreign banks seeking to service the multinational's foreign subsidiaries. 
B) multinational banking operations help a bank prevent the erosion of its traveler's check, tourist, and foreign business markets from foreign bank competition. 
C) by maintaining foreign branches and foreign currency balances, banks may reduce transaction costs and foreign exchange risk on currency conversion if government controls can be circumvented. 
D) multinational banks are often not subject to the same regulations as domestic banks.There may be reduced need to publish adequate financial information, lack of required deposit insurance and reserve requirements on foreign currency deposits, and the absence of territorial restrictions. 
A) banks follow their multinational customers abroad to prevent the erosion of their clientele to foreign banks seeking to service the multinational's foreign subsidiaries. 
B) multinational banking operations help a bank prevent the erosion of its traveler's check, tourist, and foreign business markets from foreign bank competition. 
C) by maintaining foreign branches and foreign currency balances, banks may reduce transaction costs and foreign exchange risk on currency conversion if government controls can be circumvented. 
D) multinational banks are often not subject to the same regulations as domestic banks.There may be reduced need to publish adequate financial information, lack of required deposit insurance and reserve requirements on foreign currency deposits, and the absence of territorial restrictions.

Question 2

Who benefits from debt-for-equity swaps?

Accepted Answer

A) The creditor bank 
B) The LDC 
C) The market maker 
D) All of the above 
A) The creditor bank 
B) The LDC 
C) The market maker 
D) All of the above

Question 3

The Eurocurrency market

Accepted Answer

A) is only in Europe. 
B) is an external banking system that runs parallel to the domestic banking system of the country that issued the currency. 
C) has languished following monetary union in Europe. 
D) none of the above 
A) is only in Europe. 
B) is an external banking system that runs parallel to the domestic banking system of the country that issued the currency. 
C) has languished following monetary union in Europe. 
D) none of the above

Question 4

A bank may establish a multinational operation for the reason of low marginal costs.The underlying rationale being that

Accepted Answer

A) banks follow their multinational customers abroad to prevent the erosion of their clientele to foreign banks seeking to service the multinational's foreign subsidiaries. 
B) multinational banking operations help a bank prevent the erosion of its traveler's check, tourist, and foreign business markets from foreign bank competition. 
C) managerial and marketing knowledge developed at home can be used abroad with low marginal costs. 
D) the foreign bank subsidiary can draw on the parent bank's knowledge of personal contacts and credit investigations for use in that foreign market. 
A) banks follow their multinational customers abroad to prevent the erosion of their clientele to foreign banks seeking to service the multinational's foreign subsidiaries. 
B) multinational banking operations help a bank prevent the erosion of its traveler's check, tourist, and foreign business markets from foreign bank competition. 
C) managerial and marketing knowledge developed at home can be used abroad with low marginal costs. 
D) the foreign bank subsidiary can draw on the parent bank's knowledge of personal contacts and credit investigations for use in that foreign market.

Question 5

In reference to capital requirements,value-at-risk analysis

Accepted Answer

A) refers to traditional bank loans and deposits. 
B) refers to a "risk-focused" approach to determining adequate bank capital. 
C) provides a level of confidence measure of the probability of the maximum loss that can occur during a period of time. 
D) both b) and c) 
A) refers to traditional bank loans and deposits. 
B) refers to a "risk-focused" approach to determining adequate bank capital. 
C) provides a level of confidence measure of the probability of the maximum loss that can occur during a period of time. 
D) both b) and c)

Question 6

ABC International can borrow $4,000,000 at LIBOR plus a lending margin of .65 percent per annum on a three-month rollover basis from Barclays in London.Three month LIBOR is currently 5.5 percent.Suppose that over the second three-month interval LIBOR falls to 5.0 percent.How much will ABC pay in interest to Barclays over the six-month period for the Eurodollar loan?

Accepted Answer

A) $50,000 
B) $100,000 
C) $118,000 
D) $120,000 
A) $50,000 
B) $100,000 
C) $118,000 
D) $120,000

Question 7

A bank may establish a multinational operation for the reason of knowledge advantage.The underlying rationale being that

Accepted Answer

A) local firms may be able to obtain from a foreign subsidiary bank operating in their country more complete trade and financial market information about the subsidiary's home country than they can obtain from their own domestic banks. 
B) by maintaining foreign branches and foreign currency balances, banks may reduce transaction costs and foreign exchange risk on currency conversion if government controls can be circumvented. 
C) greater stability of earnings is possible with international diversification.Offsetting business and monetary policy cycles across nations reduces the country-specific risk of any one nation. 
D) the foreign bank subsidiary can draw on the parent bank's knowledge of personal contacts and credit investigations for use in that foreign market. 
A) local firms may be able to obtain from a foreign subsidiary bank operating in their country more complete trade and financial market information about the subsidiary's home country than they can obtain from their own domestic banks. 
B) by maintaining foreign branches and foreign currency balances, banks may reduce transaction costs and foreign exchange risk on currency conversion if government controls can be circumvented. 
C) greater stability of earnings is possible with international diversification.Offsetting business and monetary policy cycles across nations reduces the country-specific risk of any one nation. 
D) the foreign bank subsidiary can draw on the parent bank's knowledge of personal contacts and credit investigations for use in that foreign market.

Question 8

Why would a U.S.bank open a foreign branch bank instead of a foreign chartered subsidiary?

Accepted Answer

A) This form of bank organization allows the bank to be able to extend a larger loan to a customer than a locally chartered subsidiary bank of the parent. 
B) To slow down check clearing and maximize the bank's float. 
C) To avoid U.S.banking regulation. 
D) Both a) and c) 
A) This form of bank organization allows the bank to be able to extend a larger loan to a customer than a locally chartered subsidiary bank of the parent. 
B) To slow down check clearing and maximize the bank's float. 
C) To avoid U.S.banking regulation. 
D) Both a) and c)

Question 9

Proceeding the Asian crisis,

Accepted Answer

A) bankers from industrialized countries actively sought to finance the growth opportunities in the region. 
B) the risk exposure of the lending banks in East Asia was primarily to local banks and commercial firms, and not to sovereignties, as in the LDC debt crisis. 
C) bankers failed to correctly assess the political and economic risks. 
D) bankers were willing to lend huge amounts to borrowers with a limited potential to repay. 
E) all of the above 
A) bankers from industrialized countries actively sought to finance the growth opportunities in the region. 
B) the risk exposure of the lending banks in East Asia was primarily to local banks and commercial firms, and not to sovereignties, as in the LDC debt crisis. 
C) bankers failed to correctly assess the political and economic risks. 
D) bankers were willing to lend huge amounts to borrowers with a limited potential to repay. 
E) all of the above

Question 10

A bank sold a 3*9 FRA.Payment is made when?

Accepted Answer

A) At the end of 3 months 
B) At the end of 6 months 
C) At the end of 9 months 
D) None of the above 
A) At the end of 3 months 
B) At the end of 6 months 
C) At the end of 9 months 
D) None of the above

Question 11

A domestic bank that follows a multinational client abroad to preserve that banking relationship

Accepted Answer

A) is playing the role of the desperate housewife in this relationship. 
B) is pursuing a wholesale defensive strategy. 
C) is pursuing a retail defensive strategy. 
D) none of the above 
A) is playing the role of the desperate housewife in this relationship. 
B) is pursuing a wholesale defensive strategy. 
C) is pursuing a retail defensive strategy. 
D) none of the above

Question 12

A forward rate agreement (FRA)is a contract between two banks

Accepted Answer

A) that allows the Eurobank to hedge the interest rate risk in mismatched deposits and credits. 
B) in which the buyer agrees to pay the seller the increased interest cost on a notional amount if interest rates fall below an agreed rate, and the seller agrees to pay the buyer the increased interest cost if interest rates increase above the agreed rate. 
C) that is structured to capture the maturity mismatch in standard-length Eurodeposits and credits. 
D) all of the above 
A) that allows the Eurobank to hedge the interest rate risk in mismatched deposits and credits. 
B) in which the buyer agrees to pay the seller the increased interest cost on a notional amount if interest rates fall below an agreed rate, and the seller agrees to pay the buyer the increased interest cost if interest rates increase above the agreed rate. 
C) that is structured to capture the maturity mismatch in standard-length Eurodeposits and credits. 
D) all of the above

Question 13

Why would a U.S.bank open a foreign branch bank?

Accepted Answer

A) Because this form of bank organization can allow a U.S.bank to provide a fuller range of services for its MNC customers than it can through a representative office. 
B) To avoid U.S.banking regulation on transactions routed through that foreign country. 
C) Because this form of organization allows the bank to service MNC clients at low cost and without the need of having bank personnel located in the country. 
D) both a) and b) 
A) Because this form of bank organization can allow a U.S.bank to provide a fuller range of services for its MNC customers than it can through a representative office. 
B) To avoid U.S.banking regulation on transactions routed through that foreign country. 
C) Because this form of organization allows the bank to service MNC clients at low cost and without the need of having bank personnel located in the country. 
D) both a) and b)

Question 14

A bank bought a "three against six" FRA.Payment is made when?

Accepted Answer

A) At the end of 3 months 
B) At the end of 6 months 
C) At the end of 9 months 
D) None of the above 
A) At the end of 3 months 
B) At the end of 6 months 
C) At the end of 9 months 
D) None of the above

Question 15

A bank may establish a multinational operation for the reason of home country information services.The underlying rationale being that

Accepted Answer

A) by maintaining foreign branches and foreign currency balances, banks may reduce transaction costs and foreign exchange risk on currency conversion if government controls can be circumvented. 
B) local firms may be able to obtain from a foreign subsidiary bank operating in their country more complete trade and financial market information about the subsidiary's home country than they can obtain from their own domestic banks. 
C) the foreign bank subsidiary can draw on the parent bank's knowledge of personal contacts and credit investigations for use in that foreign market. 
D) greater stability of earnings is possible with international diversification.Offsetting business and monetary policy cycles across nations reduces the country-specific risk of any one nation. 
A) by maintaining foreign branches and foreign currency balances, banks may reduce transaction costs and foreign exchange risk on currency conversion if government controls can be circumvented. 
B) local firms may be able to obtain from a foreign subsidiary bank operating in their country more complete trade and financial market information about the subsidiary's home country than they can obtain from their own domestic banks. 
C) the foreign bank subsidiary can draw on the parent bank's knowledge of personal contacts and credit investigations for use in that foreign market. 
D) greater stability of earnings is possible with international diversification.Offsetting business and monetary policy cycles across nations reduces the country-specific risk of any one nation.

Question 16

An Edge Act bank is typically located in a state different from that of its parent in order to get around the prohibition on interstate branch banking.

Accepted Answer

A) True 
 B)False

Question 17

One enduring truth of banking is that

Accepted Answer

A) for some reason, bankers always seem willing to lend huge amounts to borrowers with a limited potential to repay. 
B) credit ratings work, but only in the aggregate. 
C) when liquidity dries up, bankers are typically able to ride out the storm by buying up other investors debt at pennies on the dollar, holding it until the crisis is over, and then selling at a huge profit. 
D) none of the above 
A) for some reason, bankers always seem willing to lend huge amounts to borrowers with a limited potential to repay. 
B) credit ratings work, but only in the aggregate. 
C) when liquidity dries up, bankers are typically able to ride out the storm by buying up other investors debt at pennies on the dollar, holding it until the crisis is over, and then selling at a huge profit. 
D) none of the above

Question 18

A bank may establish a multinational operation for the reason of prestige.The underlying rationale being that

Accepted Answer

A) local firms may be able to obtain from a foreign subsidiary bank operating in their country more complete trade and financial market information about the subsidiary's home country than they can obtain from their own domestic banks. 
B) the foreign bank subsidiary can draw on the parent bank's knowledge of personal contacts and credit investigations for use in that foreign market. 
C) very large multinational banks have high perceived prestige, liquidity, and deposit safety that can be used to attract clients abroad. 
D) multinational banks are often not subject to the same regulations as domestic banks.There may be reduced need to publish adequate financial information, lack of required deposit insurance and reserve requirements on foreign currency deposits, and the absence of territorial restrictions. 
A) local firms may be able to obtain from a foreign subsidiary bank operating in their country more complete trade and financial market information about the subsidiary's home country than they can obtain from their own domestic banks. 
B) the foreign bank subsidiary can draw on the parent bank's knowledge of personal contacts and credit investigations for use in that foreign market. 
C) very large multinational banks have high perceived prestige, liquidity, and deposit safety that can be used to attract clients abroad. 
D) multinational banks are often not subject to the same regulations as domestic banks.There may be reduced need to publish adequate financial information, lack of required deposit insurance and reserve requirements on foreign currency deposits, and the absence of territorial restrictions.

Question 19

Merchant banks are different from traditional commercial banks in what way(s)?

Accepted Answer

A) Merchant banks can engage in investment banking activities. 
B) Merchant banks can arrange for foreign exchange transactions. 
C) Merchant banks can assist their clients in hedging exchange rate risk. 
D) All of the above 
A) Merchant banks can engage in investment banking activities. 
B) Merchant banks can arrange for foreign exchange transactions. 
C) Merchant banks can assist their clients in hedging exchange rate risk. 
D) All of the above

Question 20

Currently,the biggest bank in the world is

Accepted Answer

A) Citigroup. 
B) Bank of America. 
C) UBS. 
D) The World Bank. 
A) Citigroup. 
B) Bank of America. 
C) UBS. 
D) The World Bank.

A bank may establish a multinational operation for the reason of transaction costs.The underlying rationale being that

Who benefits from debt-for-equity swaps?

The Eurocurrency market

A bank may establish a multinational operation for the reason of low marginal costs.The underlying rationale being that

In reference to capital requirements,value-at-risk analysis

A bank may establish a multinational operation for the reason of knowledge advantage.The underlying rationale being that

Why would a U.S.bank open a foreign branch bank instead of a foreign chartered subsidiary?

Proceeding the Asian crisis,

A bank sold a 3*9 FRA.Payment is made when?

A domestic bank that follows a multinational client abroad to preserve that banking relationship

A forward rate agreement (FRA)is a contract between two banks

Why would a U.S.bank open a foreign branch bank?

A bank bought a "three against six" FRA.Payment is made when?

A bank may establish a multinational operation for the reason of home country information services.The underlying rationale being that

An Edge Act bank is typically located in a state different from that of its parent in order to get around the prohibition on interstate branch banking.

One enduring truth of banking is that

A bank may establish a multinational operation for the reason of prestige.The underlying rationale being that

Merchant banks are different from traditional commercial banks in what way(s)?

Currently,the biggest bank in the world is

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters

Exam 11: International Banking and Money Market

A bank may establish a multinational operation for the reason of transaction costs.The underlying rationale being that

Who benefits from debt-for-equity swaps?

The Eurocurrency market

A bank may establish a multinational operation for the reason of low marginal costs.The underlying rationale being that

In reference to capital requirements,value-at-risk analysis

A bank may establish a multinational operation for the reason of knowledge advantage.The underlying rationale being that

Why would a U.S.bank open a foreign branch bank instead of a foreign chartered subsidiary?

Proceeding the Asian crisis,

A bank sold a 3*9 FRA.Payment is made when?

A domestic bank that follows a multinational client abroad to preserve that banking relationship

A forward rate agreement (FRA)is a contract between two banks

Why would a U.S.bank open a foreign branch bank?

A bank bought a "three against six" FRA.Payment is made when?

A bank may establish a multinational operation for the reason of home country information services.The underlying rationale being that

An Edge Act bank is typically located in a state different from that of its parent in order to get around the prohibition on interstate branch banking.

One enduring truth of banking is that

A bank may establish a multinational operation for the reason of prestige.The underlying rationale being that

Merchant banks are different from traditional commercial banks in what way(s)?

Currently,the biggest bank in the world is

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters